POLICY
brief
ISSUE 2010/02 • June 2010Highlights
– The recent declarations of some European leaders
demon-strated a new political impetus towards the Europeanisation of
energy policy. Nevertheless, the complex allocation of
regula-tory competences between the EU and its Member States works
against coordination and harmonisation
– A possible solution could entail some Member States to
pro-mote ad hoc common policies through Schengen-like
agree-ments, i.e., binding international law agreements outside the
EU legal framework and thus escaping its formal and
proce-dural requirements
– Schengen-like agreements must however comply with the
prin-ciple of supremacy of Union Law in order to be legally feasible
– The compliance with the supremacy principle can be assessed
on the grounds of three operational criteria: pre-emption,
pri-macy of EU law and subsidiarity
– The legal feasibility assessment conducted in the two areas of
nuclear policy and security of gas supply shows that in the
for-mer area several of the most important licensing issues could
be fruitfully integrated in a Schengen-like agreement
Authors: Nicole Ahner, Jean-Michel Glachant and Adrien de Hauteclocque
Editors : Jean-Michel Glachant and Emanuela Michetti
Legal Feasibility of Schengen-like Agreements in
European Energy Policy: The Cases of Nuclear
Cooperation and Gas Security of Supply
On the web: http://fsr.eui.eu
The Florence School of Regulation (FSR) was founded in 2004 as a partnership between the Council of the European Energy Regulators (CEER) and the European University Institute (EUI), and it works closely with the European Commission. The Florence School of Regulation, dealing with the main network industries, has developed a strong core of general regulatory topics and concepts as well as inter-sectoral discussion of regulatory practices and policies.
Florence School of Regulation Robert Schuman Centre for Advanced Studies European University Institute Villa Malafrasca
Via Boccaccio 151 50133 Firenze - Italy
Contact FSR coordinator: Annika.Zorn@eui.eu
Florence School of Regulation
Background
The recent declarations of some European leaders demonstrat-ed a new political impetus towards the Europeanisation of
energy policy. Nevertheless, the complex allocation of
author-ity and regulatory competences between the EU and its Mem-ber States works against coordination and harmonisation. In-stitutional paralysis, low reactivity to events as well as political horse-trading are calling for an alternative legal framework for cooperation.
Differentiated integration in energy policy
A possible solution to enhance harmonisation in the area of energy could entail some pioneering Member States to mote ad hoc common policies escaping the formal and
pro-cedural requirements of EU law. In this case, some Member States could reach common positions and proceed faster on a specific energy policy area whilst others are unwilling or un-able to do so. Such differentiation allows for a more flexible form of integration.
Differentiation has always been a reality of the European inte-gration process. Certain well-known successes like the Schen-gen Agreement have allowed progress without shaking the constitutional order of the Union. Box 1 illustrates the devel-opment of the Schengen Agreement, established initially by 5 EU Countries (Belgium, Germany, France, Luxembourg and the Netherlands) in 1985, when a more general consensus on abolishing the passport controls at the intra-Community bor-ders could not be reached.
Box 1 - The Schengen Agreement
Today the provisions of the Schengen acquis are fully applied by 22 EU countries (Austria, Belgium, Czech Republic,
Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden), plus Norway, Iceland and Switzerland.
Schengen Agreement 1985 Schengen Convention 1990
Outside the EU legal framework 1995
Integration into EU acquis (Treaty of Amsterdam)
1999
Even though the Schengen regulation was integrated into the EU acquis in 1999, the agreement represents the archetype of closer cooperation between a number of Member States that started entirely outside the EU framework.
An alternative, Treaty-based means of differentiation is the “enhanced cooperation” - described in Box 2 -, which however, has not proved very successful so far.
Conversely, Schengen-like agreements can be concluded by some Member States under international law, so-called “inter
se agreements”. In practical terms, such agreements imply that
the Member States abandon the narrow framework of EU Law and act under the broader framework of international law, where they preserve treaty-making powers.
The legal conditions for Schengen-like agreements are less onerous than the conditions set for the enhanced cooperation mechanism. Nevertheless, they are also subject to important legal limits and in particular, they must fully comply with the principle of supremacy of Union Law. Broadly speaking, the principle of supremacy of Union law means that an inter se
agreement cannot be concluded where there is a risk of (actual of potential) interference with Union law. However, this prin-ciple is complicated to apply in practice.
3. Legal feasibility assessment
The assessment of the compliance of an agreement with the supremacy principle is a very complex matter and requires a case-by-case analysis on the grounds of more operational cri-teria, namely pre-emption, primacy of EU law and subsidi-arity, which all need to be fulfilled. Box 3 illustrates the three assessment criteria.
Box 2 - Three case studies
The enhanced cooperation regime is a form of differenti-ated integration introduced by the Treaty of Amsterdam. Remarkably, there has not been a single instance so far
where this mechanism has been used in practice, mainly due to the rigidity of the procedural requirements. Strict conditions apply, from the number of Member States re-quired (nine) to the qualified majority needed to enact the initial authorisation.
Box 3 – The assessment criteria
1st criterion: Pre-emption
Areas of exclusive Union competence: inter se agree-ments are illegal even if the Union law has not occupied the field yet.
Areas of shared competence and extensive occupation by Union law: inter se agreements are illegal in both cases where Union legislation exists (actual occupation) and where no legislation exists but the Union has a duty to fill the gap (potential occupation).
Areas of shared competence and non-extensive occupa-tion by Union law: inter se agreements are illegal if a case-by-case assessment on the substantive compatibility reveals a direct, non-minor and non-temporary conflict; inter se agreements are illegal also in absence of conflict if they interfere with the proper functioning of the Un-ion system, the integrity of the UnUn-ion legal order and the common organisation of the markets.
2nd criterion: Primacy of EU law
According to Member States’ duty of sincere cooperation, the principle of primacy of EU law requires inter se agree-ments not to conflict in substance with general principles of Union law, e.g., non-discrimination on grounds of na-tionality. To fulfil this 2nd criterion, a safeguard clause in the Schengen Agreement was introduced. It clearly stat-ed that “The provisions of this convention shall apply only in
so far they are compatible with Community law”. 3rd criterion: Subsidiarity
Given the special qualities of Union law (certainty, en-forcement, etc.), in fields of shared competence Union law should generally be preferred to inter se agreements as long as they do not create clear benefits compared with action at the Union level.
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4. Two potential areas of application
Schengen-like agreements are not legally feasible in eve-ry area of EU energy policy. The actual legal feasibility depends on the development of Union law which in turn often depends on the willingness of Member States to transfer competences at the Union level. In what follows a feasibility assessment for Schengen-like agreements is conducted in two areas: nuclear policy and security of gas supply.
A. Nuclear policy
While some Member States (such as the UK, Italy and Romania) are today implementing or considering a long-term growth in nuclear capacity, several others (such as Ireland and Austria) remain resolutely opposed. It is unlikely that Europe will ever speak with one voice on matters of electricity generation mix and nuclear power, which is an exclusive competence of Member States. Moreover, Member States are subject to EU law and must comply with the Directives and Regulations made under the EURATOM Treaty. The feasibility assessment on 3 possible
ar-eas of cooperation shows that inter se agreements could fruit-fully integrate several important licensing issues concerning reactor design certification and the disposal of radioactive waste and spent nuclear fuel.
MARKET RULES
Why cooperate? An inter se agreement could clarify market rules for nuclear investors and operators on the design and use of long-term contracts and on the creation of joint ventures, open seasons and investment in merchant lines.
Inter se agreement legally feasible? No.
Why? Pre-emption: Most market frame issues (such as long-term energy contracts and joint ventures) are under the ju-risdiction of competition rules where the Commission enjoys exclusive competence. Generally, to the extent that nuclear en-ergy competes on an equal footing with other enen-ergy sources in liberalized markets, an inter se agreement distorting com-petition among producers cannot fulfil the pre-emption cri-terion.
as well as the setting-up of regional centres of disposal.
Inter se agreement legally feasible? Yes, provided compliance is
ensured with Directives on nuclear safety.
Why? i) Pre-emption: The Court of Justice recognised a shared competence in matter of nuclear safety, but at present waste management remains a national responsibility with Commu-nity legislation mainly covering safety issues; ii) Primacy: As long as foreign undertakings operating in one of the contract-ing Member States would not be precluded to use the new re-gional centre for disposal, the non-discrimination principle would be respected; iii) Subsidiarity: EU law explicitly states that regional cooperation could constitute an interim step to a Union-wide legislation in this area.
REACTORS DESIGN
Why cooperate? The standardisation of reactor design would contribute to make the licensing process more effective, stabi-lise the regulatory framework as well as increase international cooperation.
Inter se agreement legally feasible? Yes.
Why? i) Pre-emption: Reactor design is only subject to the common safety requirements. Union legislation does not go further with harmonisation and does not include any reci-procity mechanism for design approval. There is movement towards harmonisation in licensing, but reactor design certifi-cation is done nationally; ii) Primacy: An agreement on com-mon licensing requirements would contribute to create a level-playing field among nuclear operators of different nationality; iii) Subsidiarity: Union law could be better used to consolidate the future acquis of an inter se agreement rather than initiate the harmonization of reactor design assessment itself.
B. Security of gas supply
High energy prices, the occurrence of regional supply shortfalls and above all, the increasing reliance on imports from third countries are reasons for unsettling concern for the security of gas supply. Nevertheless, security of gas supply policy basically happens at the national level and it is unlikely that the EU will be able to develop a coherent common policy on obtaining secure energy supplies in the short-term. The main challenges to a sup-ply security policy at European level are political, both internally and externally. The feasibility assessment on 3 possible areas
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TRANSPARENCY
Why cooperate? An inter se agreement could contain require-ments for aggregating data at regional level, releasing informa-tion and enhancing the relevance of the released informainforma-tion for regulators and market participants.
Inter se agreement legally feasible? No.
Why? Pre-emption: Transparency understood in the above falls under shared competence but occupation of the field by Union law is already very broad. The powers of ACER (Agency for the Cooperation of Energy Regulators) introduced by the 3rd package include network codes on these issues: a prelimi-nary agreement on transparency will be therefore provided by ACER soon or later. Finally, the Commission itself is consider-ing a possible future legislative initiative in this area.
EMERGENCY
Why cooperate? An inter se agreement would allow a mini-mum level of harmonisation among countries, regulators, hubs and Transmission System Operators with regard to the
different emergency plans defined by the Member States.
Inter se agreement legally feasible? No.
Why? Pre-emption: The issue falls under shared competence but there is a broad occupation of the field by EU law: Member States treaty-making competence is limited.
EXTERNAL SUPPLY FRAMEWORK
Why cooperate? An inter se agreement would allow coordi-nation and information mechanisms for bilateral actions, ar-rangements and contracts based on a high level of transpar-ency.
Inter se agreement legally feasible? No.
Why? Pre-emption: At least some of the aspects covered by the usual bilateral energy agreements concluded between Mem-ber States and third countries are in the exclusive competence of the EU. In addition, the EU possesses an exclusive, implied external power relevant for the regulation of the EU external energy relations.
